UNIT-3 PART-1

Overview of MSME, Role of Central Govt & State Govt in supporting SMEs, subsidies, grants, export-

oriented units - fiscal & tax concessions, other government initiatives and inclusive entrepreneurial

growth Government e Market place (GeM), Zero effect Zero defect, Lean Manufacturing., Startup India,

Stand Up India, Make in India, Innovate in India.

Micro, Small and Medium Enterprises
 Introduction:

The Government of India enacted the Micro, Small and Medium Enterprises Development

(MSMED) Act, 2006 on June 16, 2006, which was notified on October 2, 2006. With the

enactment of the MSMED Act 2006, the paradigm shift that has taken place is the inclusion of

the services sector in the definition of Micro, Small, and Medium Enterprises, apart

from extending the scope to Medium Enterprises

 Micro, Small and Medium
Enterprises
• MSME
 MSME classification:

Sr. No Type of Enterprise Investment Turnover

1. Micro Enterprise Not more than Rs.1 Crore Not more than Rs.5 Crore

2. Small Enterprise Not more than Rs.10 Crore Not more than Rs.50
Crore

3. Medium Enterprise Not more than Rs.50 Crore Not more than Rs.250
Crore
benefits of MSMEs

• lower interest rates

• subsidy on patent registration
• tax exemption
• electricity bill concessions
• reimbursement of ISO certification
• collateral-free bank loans, etc.
Under government schemes, MSMEs
Under government schemes, MSMEs can apply for the
• Market Promotion & Development Scheme (MPDA),
• Coir Vikas Yojana (CVY),
• Trade and Industry Related Functional Support Services (TIRFSS),
• Export Market Promotion (EMP),
• Domestic Market Promotion (DMP),
• Revamped Scheme of Fund for Regeneration of Traditional Industries (SFURTI),
• CGS (Credit Guarantee Scheme for Micro and Small Enterprises),
• Mudra loan scheme, SMILE (Small Industries Development Bank of India Loan for Small Enterprises),
NSIC, NABARD,
• Credit Link Capital Subsidy Scheme for Technology Upgradation,
• Market Development Assistance Scheme,
• Stand-Up India Scheme, Technology
Industries under MSME
 Role of Government in Promoting
SMEs
• Credit rating of MSMEs

• DE-reservation
• Credit finance
• Emerging funding sources
• Competitive Technology
• Micro and Small Enterprises Cluster Development Programme
• National Manufacturing Competitiveness Programme
 Subsidy

• A subsidy is an incentive given by the government to individuals

or businesses in the form of cash, grants, or tax breaks that
improve the supply of certain goods and services. With
subsidies, consumers are able to access cheaper products and
commodities. Markets that have positive externalities, which are
extra benefits to society, tend to be favoured in policy to provide
a greater supply of that good and service.
 Types of Subsidies

. .
Productio Consumpti Export Employment
subsidy subsidy
n subsidy on subsidy
1. Production subsidy

• This type of subsidy is provided in order to encourage the

production of a product. In order for manufacturers to increase
their production output, the government compensates for some
of its parts in order to lessen their expenses while increasing
their output. As a result, production and consumption grow, but
the price remains the same. The drawback of such an incentive
is that it may promote overproduction
2. Consumption subsidy

• This happens when the government offsets the costs of

food, education, healthcare, and water.
3. Export subsidy

• An obvious fact is that a country or state earns from its

exports and exports help to balance its economy. That is why,
to encourage exports, the government subsidizes the cost.
However, this can be easily abused, especially by exporters
who exaggerate the prices of their goods so that they receive
a larger incentive, eventually raising their profits at the
expense of taxpayers.
4. Employment subsidy

• This incentive is given by the government to companies

and organizations to enable them to provide more job
opportunities.
Other Types of Subsidies

• Export Subsidy
Import Subsidy
Tax Subsidy
Oil Subsidy
Housing Subsidy
Employment Subsidy
Transport Subsidy
Environment Externalities
Advantages of Subsidies

• 1. Lowering prices and controlling inflation

• They are especially applicable in the area of production
cost inputs such as fuel prices, particularly when global
crude oil prices are rising. Many countries subsidize fuel
costs in order to keep prices from ballooning
• 2. Preventing the long-term decline of industries
• There are many industries that should be kept alive and
functional, such as fishing and farming because they are
essential to support a population. Many new and fast-
growing industries may also benefit from being
subsidized.
• 3. A greater supply of goods
• Governments want to increase the access of their
population to Goods & Services such as Water, Food,
and Education. They, therefore, provide an incentive
that could be in the form of a tax credit or even straight
up cash. Markets that have positive externalities are
usually the ones that receive such benefits.
 Disadvantages of Subsidies

1. Shortage of supply
Though one of the advantages of subsidies is the greater supply of goods,
a shortage of supply can also occur. This is because lowered prices can
lead to a sudden rise in demand that many producers may find very hard
to meet. Ultimately, it can lead to very high demand that causes an
increase in prices.
2. Difficulty in measuring success
Subsidies are usually effective and helpful. However, if the
government were to make a report of its success in using subsidies,
it would be a different story. This is because it is hard to quantify
the success of subsidies.
• 3. Higher taxes
• How will the government raise funds to use for
subsidizing industries? Of course, by imposing higher
taxes. So, it is the general population and corporations
who provide the means to enable the government to
subsidize industries.
 Grants:
• Government grants are non-repayable funds provided to businesses,
usually to encourage innovation and research and development (R&D).
Grants are often aimed at specific industries or groups such as women
entrepreneurs, youth, and socially or economically marginalized
communities
• Startup India Seed Fund Scheme
• Technology Development Board (TDB)
• Women Entrepreneurship Platform (WEP) Grants
• Atal Innovation Mission
Startup India Seed Fund Scheme
(SISFS)
• This scheme provides financial assistance to early-stage
startups for market entry, prototype development, and proof of
concept. The seed fund is aimed at promoting innovation and
entrepreneurship in high-growth sectors.
Technology Development Board (TDB) Grants:

• Technology Development Board offers grants to companies

for innovative technology projects that have high potential for
commercialization. These grants help businesses move from
the idea phase to market-ready products.
•
Women Entrepreneurship Platform (WEP) Grants:
• Grants are provided to women-led businesses through the NITI
Aayog’s WEP to encourage women entrepreneurs in sectors
like technology, manufacturing, and services.
Atal Innovation Mission (AIM):

• AIM is a flagship initiative under NITI Aayog aimed at promoting

a culture of innovation. The Atal Tinkering Labs (ATLs)
and Atal Incubation Centers (AICs) provide grants and
financial support to encourage startups in technology and
innovation-based ventures.
Export-Oriented Units (EOUs):

• Export- oriented u nits (EOUs) are businesses primarily focused on exporting goods or
services. The government offers a range of incentives to promote these units to increase
India’s export potential and create more jobs.
Export Promotion Capital Goods (EPCG) Scheme :to import capital goods for
production without paying customs duty

Merchandise Exports from India Scheme (MEIS):financial incentives

for goods exporters

Special Economic Zones (SEZs):areas that offer tax

exemptions

Service Exports from India Scheme (SEIS):financial incentives to exporters of services

such as IT, business
1- Export Promotion Capital Goods (EPCG) Scheme:
.

• This scheme allows EOUs to import capital goods for production

without paying customs duty, provided they commit to exporting a
certain percentage of their production. This reduces the capital
costs for businesses that primarily serve foreign
[Link] Economic Zones (SEZs):
• SEZs are designated areas that offer tax exemptions and
streamlined regulatory frameworks to businesses engaged in
export activities. Entrepreneurs setting up businesses in SEZs
benefit from relaxed labor laws, exemptions from GST, and reduced
duties on imports.
• markets
Export-Oriented Units (EOUs):

[Link] Exports from India Scheme (MEIS):

• MEIS provides financial incentives for goods exporters, reducing
the overall cost of exporting by offering duty credits based on
export performance. The aim is to promote labor-intensive
manufacturing and increase India’s global trade presence.
[Link] Exports from India Scheme (SEIS):
• SEIS offers financial incentives to exporters of services such as
IT, business consultancy, and tourism. Entrepreneurs in service
sectors receive duty credit scrips which can be used to pay
import duties or sold in the open market.
 Fiscal and Tax Concessions:

Tax
Holidays:100
Reduced Research To encourage
% tax Corporate and
entrepreneurship
and business
exemption for Tax; for Development development, the
Exemption
three new from Angel
Deductions : Indian government
offers several fiscal
consecutive manufacturi Tax
claim up to and tax
years within ng 150% concessions that
their first ten deductions on reduce the financial
years of
companies expenditure
burden on start-ups
and MSMEs.
operation.
to 15%,
[Link] Holidays:
• Startups recognized by the Department for Promotion of Industry and Internal Trade
(DPIIT) are eligible for a tax holiday under Section 80-IAC of the Income Tax Act. This allows
startups to claim a 100% tax exemption for three consecutive years within their first ten years of
operation.

[Link] Corporate Tax:

• To encourage industrial entrepreneurship, the government has reduced the corporate tax rate for
new manufacturing companies to 15%, one of the lowest rates globally.

[Link] from Angel Tax:

• Startups recognized under the Startup India initiative are exempt from the controversial Angel
Tax imposed on the premium received during funding rounds.

[Link] and Development Deductions:

• Companies engaged in R&D activities can claim up to 150% deductions on expenditure incurred
under Section 35(2AB). This concession encourages innovation in technology and
pharmaceuticals.
Other Government Initiatives:
[Link]-Up India:
• Stand-Up India scheme provides bank loans between ₹10 lakh
and ₹1 crore to SC/ST and women entrepreneurs. The scheme
aims to promote entrepreneurship in underrepresented groups
and is part of the government’s commitment to inclusive growth.
[Link] Loans:
• Under the Pradhan Mantri Mudra Yojana (PMMY),
entrepreneurs can access loans of up to ₹10 lakh for business
activities. This scheme supports micro-entrepreneurs, especially
in rural areas, where access to formal credit is limited.
Other Government Initiatives
[Link] of Doing Business:
• The Indian government has significantly simplified business
regulations to improve the ease of doing business. Measures
like the Goods and Services Tax (GST), the Insolvency and
Bankruptcy Code (IBC), and the National Single Window
System streamline compliance, making it easier for
entrepreneurs to start and manage their ventures.
 Inclusive Entrepreneurial Growth:
• Inclusive entrepreneurial growth refers to fostering entrepreneurship that benefits all
sections of society, especially marginalized groups. In India, the government is making
concerted efforts to ensure that entrepreneurship contributes to reducing economic
inequality and improving social outcomes.

• Women Entrepreneurs: Mahila Udyam Nidhi and Annapurna Scheme

• SC/ST Entrepreneurs: National SC/ST Hub
• Rural Entrepreneurship: Deen Dayal Upadhyaya Grameen Kaushalya
Yojana (DDU-GKY
• Tribal Entrepreneurship:Van Dhan Vikas Yojana
Inclusive Entrepreneurial Growth
[Link] Entrepreneurs:
• The government has launched various schemes such as Mahila
Udyam Nidhi and Annapurna Scheme to provide financial
assistance, mentorship, and skill training to women entrepreneurs.
These programs aim to break traditional barriers and encourage
women’s participation in business.
[Link]/ST Entrepreneurs:
• National SC/ST Hub provides financial assistance, capacity building,
and market access to entrepreneurs from Scheduled Castes and
Scheduled Tribes. The aim is to foster an ecosystem that supports
their participation in economic activities.
 Inclusive Entrepreneurial Growth
[Link] Entrepreneurship:
• Programs like Deen Dayal Upadhyaya Grameen Kaushalya Yojana
(DDU-GKY) focus on rural entrepreneurship by providing skill development
and funding opportunities for rural youth, encouraging them to start
businesses in agriculture, handicrafts, and small-scale manufacturing.
[Link] Entrepreneurship:
• Van Dhan Vikas Yojana supports tribal communities in developing
businesses based on forest products. This scheme promotes sustainable
entrepreneurship while preserving traditional skills.
Government e-Market place (GeM), History, Features, Uses

• Government e-Marketplace (GeM) is an online procurement

platform introduced by the Government of India to facilitate the
acquisition of goods and services for various government
departments and organizations.
• It serves as a one-stop digital portal for transparent, efficient, and
accountable procurement processes.
• GeM has transformed the procurement landscape in India,
enhancing transparency and promoting competition among
suppliers while simplifying government purchases.
 History of GeM:
• The concept of GeM was first proposed in the Union Budget of 2016-17.
• The objective was to modernize the procurement process by leveraging
technology to eliminate inefficiencies, reduce paperwork, and improve the
transparency of the procurement process. Traditionally, government
procurement was done manually, which led to various issues such as
delays, corruption, and a lack of standardization in the buying process.
• Recognizing the need for a more efficient system, the Department of
Commerce, under the Ministry of Commerce and Industry, launched GeM
on August 9, 2016. The GeM portal was developed by the Directorate
General of Supplies and Disposals (DGS&D) with technical support from
the National e-Governance Division (NeGD) and Ministry of
Electronics and Information Technology (MeitY).
 Features of GeM
• End-to-End Procurement: covers the entire lifecycle of a transaction
• Wide Range of Products and Services: allows government buyers to
procure almost everything they need from a single platform
• Transparency and Accountability: recorded digitally
• Dynamic Pricing: where sellers can change their prices based on market
conditions
• Online Bidding and Reverse Auction: obtain goods and services at the
most competitive rates
• Buyer-Seller Rating System: a rating system for both buyers and sellers,
based on the quality of transactions
• Integration with Payment Systems: quicfk and transparent payments
 Uses of GeM:

Efficient Promotes Data-Driven

Procurement Transparency Decision Making
• Cost Reduction and Reduces • Scalability and
• Empowers MSMEs Corruption Flexibility
and Startups • Enhances Vendor • Environmental and
and Buyer Social Impact
Experience
• Timely Payment and
Improved Cash Flow
 Zero effect Zero defect, Features, Uses
• Zero Defect, Zero Effect (ZED) is an initiative launched by the
Government of India to encourage manufacturers, particularly Micro,
Small, and Medium Enterprises (MSMEs), to adopt efficient and quality-
oriented manufacturing practices while minimizing the environmental
impact of their operations. The scheme was introduced in the context of
the “Make in India” campaign, to make Indian products globally
competitive by focusing on two main objectives: producing goods with
zero defects and zero environmental effects.
• The ZED initiative not only aims to improve the quality of goods produced
in India but also ensures that manufacturing processes are sustainable
and eco-friendly. This approach reflects the growing global emphasis on
quality, sustainability, and responsible production, which are key elements
in ensuring long-term industrial success.
 Features of Zero Defect, Zero Effect
(ZED):
• Zero Defect Manufacturing:
• Eco-friendly Processes (Zero Effect)
• Focus on MSMEs
• ZED Certification
• Training and Capacity Building
• Lean Manufacturing Competitiveness Scheme (LMCS)
• Technology Upgradation
Features of Zero Defect, Zero Effect
(ZED):
[Link] Defect Manufacturing:
• One of the central pillars of the ZED program is zero defect manufacturing. This
means that products produced under this initiative are of the highest quality, free
from defects, and conform to global standards. The aim is to reduce rejections and
recalls both domestically and in export markets, thereby improving India’s reputation
as a manufacturing hub.
[Link]-friendly Processes (Zero Effect):
• The “zero effect” aspect focuses on the environmental impact of manufacturing.
Manufacturers are encouraged to adopt sustainable practices that reduce waste,
minimize pollution, and conserve resources like water and energy. The idea is to
ensure that manufacturing processes have minimal adverse effects on the
environment.
Features
[Link] on MSMEs:
• While the ZED program is open to all industries, there is a special emphasis on
supporting MSMEs, which often lack the resources to adopt advanced quality
and environmental standards. The ZED certification helps these smaller
enterprises improve their production processes, adopt sustainable practices, and
become more competitive in both domestic and international markets.
[Link] Certification:
• ZED initiative provides a certification system based on a maturity assessment
model. Businesses are evaluated on various parameters like quality control,
resource efficiency, and environmental impact. The certification ranges from
basic compliance to more advanced levels, encouraging continuous
improvement. This serves as a mark of quality and sustainability for Indian
products, boosting their credibility in global markets.
Features
[Link] and Capacity Building:
• ZED also emphasizes training and capacity building for
MSMEs. The government provides training programs to
improve awareness about quality control, lean manufacturing,
and sustainable practices. By equipping MSMEs with the
necessary skills and knowledge, the initiative ensures long-term
success in achieving ZED standards.
Features
[Link] Support:
• To help MSMEs transition to ZED-compliant manufacturing, the
government provides financial support in the form of subsidies for
assessment, certification, and training. Additionally, the initiative
encourages investments in energy-efficient technologies and cleaner
production methods.
[Link] Manufacturing Competitiveness Scheme (LMCS):
• One of the supporting schemes for ZED is the Lean Manufacturing
Competitiveness Scheme, which encourages MSMEs to adopt lean
manufacturing practices. This focuses on optimizing resources, reducing
waste, and improving overall efficiency, which aligns with the ZED
philosophy of “zero defect, zero effect.”
Features
[Link] Upgradation:
• ZED initiative also promotes technological innovation and
upgradation. Manufacturers are encouraged to adopt the latest
technologies that can help them improve quality and reduce
environmental footprints. This can include automation,
renewable energy systems, and efficient waste management
technologies.
Uses and Benefits of Zero Defect, Zero
Effect
• Improved Product Quality
• Enhanced Global Competitiveness
• Environmental Sustainability
• Cost Reduction and Efficiency
• Support for MSMEs
• Job Creation and Economic Growth
• Energy and Resource Efficiency
• Long-term Sustainability
Uses and Benefits of Zero Defect, Zero
Effect (ZED):
• Example: ZED in Action
• Several MSMEs in India have already begun to reap the benefits of
the ZED initiative. For instance, manufacturers in sectors like
textiles, automotive components, and electronics have successfully
implemented zero defect strategies, improving their product quality
and expanding their reach in international markets. At the same
time, they have adopted environmentally friendly processes, such
as energy-efficient machinery and waste recycling systems,
significantly reducing their carbon footprint.
Uses and Benefits of Zero Defect, Zero
Effect (ZED):
• Challenges and Future Prospects:
• While the ZED initiative has shown great promise, challenges
remain, particularly in terms of scaling up adoption among
MSMEs. Many small businesses still face hurdles like lack of
awareness, inadequate infrastructure, and limited access to
financial resources for upgrading technology.
• However, with continued government support, increased
awareness, and stronger partnerships between public and
private sectors, the ZED program has the potential to transform
India’s manufacturing sector.
 Lean Manufacturing, History, Features, Uses
• Lean Manufacturing is a production philosophy and methodology
focused on reducing waste while maximizing productivity, efficiency,
and value to the customer. The concept centers around creating
more value for customers with fewer resources by optimizing
processes, minimizing defects, and eliminating non-essential steps in
production. While the term “lean” may suggest a stripped-down
approach, the idea is to streamline processes in ways that maximize
efficiency and competitiveness without compromising quality.
 Features of Lean Manufacturing:

• Just-in-Time (JIT) Production

• Kaizen (Continuous Improvement
• Elimination of Waste (Muda)
• Value Stream Mapping
• Jidoka (Automation with a Human Touch)
• 5S System: Sort, Set in order, Shine, Standardize,
and Sustain
• Kanban System
• Employee Involvement
Features of Lean Manufacturing:

• Lean manufacturing is characterized by several key features that contribute to its

success in reducing waste, improving efficiency, and maintaining product quality.
• Just-in-Time (JIT) Production:
• JIT is one of the foundational principles of lean manufacturing. The idea is to
produce only what is needed, in the quantity needed, and when it is needed. By
reducing inventory levels, manufacturers can minimize waste and reduce the cost
of holding excessive stock.
• Kaizen (Continuous Improvement):
• Kaizen is a Japanese term meaning “change for better” or “continuous
improvement.” In lean manufacturing, kaizen involves small, incremental changes
to processes that lead to improved efficiency, quality, and reduced waste. It is a
collective effort, involving input from all employees, from the shop floor to
management.
Features of Lean Manufacturing:

• Elimination of Waste (Muda):

• One of the most important aspects of lean manufacturing is the focus
on identifying and eliminating muda, or waste. Lean categorizes
waste into seven types: overproduction, waiting, unnecessary
transport, extra processing, excess inventory, unnecessary motion,
and defects.
• Value Stream Mapping:
• Value stream mapping is a tool used in lean manufacturing to
analyze and design the flow of materials and information required to
bring a product to the customer. This helps in identifying bottlenecks,
redundancies, and waste in the production process.
Features of Lean Manufacturing:

• Jidoka (Automation with a Human Touch):

• Jidoka refers to the concept of empowering workers to stop
production whenever a problem occurs, ensuring that defects are
caught early and corrected. This concept also integrates
automated processes that are intelligently designed to detect
errors.
• 5S System:
• The 5S system is a workplace organization method that stands
for Sort, Set in order, Shine, Standardize, and Sustain. It
ensures that the workplace is organized and clean, contributing to
efficiency, safety, and quality in the production process.
Features of Lean Manufacturing:

• Kanban System:
• The Kanban system is a visual scheduling tool used to manage inventory
levels and production flow. It allows for real-time control of the production
process by using cards or signals to indicate when new materials are
needed.
• Employee Involvement:
• Lean manufacturing promotes the involvement of all employees in the
continuous improvement process. Workers are encouraged to identify
inefficiencies, suggest improvements, and take ownership of their roles in
achieving lean goals.
Uses and Benefits of Lean Manufacturing

• Cost Reduction
• Better Customer Satisfaction
• Increased Efficiency
• Better Customer Satisfaction
• Flexibility
• Waste Reduction
• Employee Empowerment
• Environmental Sustainability
 Example of Lean Manufacturing:
• A well-known example of lean manufacturing in action is Toyota. The
Toyota Production System has been credited with transforming Toyota into
one of the most efficient and successful automakers in the world. By using
just-in-time production, kaizen, and value stream mapping, Toyota has
been able to maintain high levels of quality while reducing waste and
increasing profitability.
• Other companies, such as Ford, General Electric, and Intel, have also
successfully implemented lean manufacturing principles to streamline their
operations, reduce costs, and improve product quality. Industries ranging
from electronics to healthcare to aerospace have adopted lean practices,
showing that lean manufacturing can be applied across sectors.